The Greater Sin: Extending Credit or Borrowing Money?

Is it really more blessed to give than to receive? Is “the love of money” truly the root of all evil? Or the availability or non-availability of money? Under either circumstance, who is likely to be the sinner: the generous giver of money or the poverty-stricken taker?

These moral questions beg a definition of what “sin” is in the first place. The prevalent religious concept of Original Sin firmly plants the idea that a human being commits the unforgivable sin of maneuvering through a mortal life as the normal consequence of being born. In you accept that belief, “having” a life is necessary before sinning can begin. With your first breath you are automatically classified as a sinner. Were you a sinner before you were born? When you lose your life, do you lose your innate ability to sin?

“Having” a mortal life brought with it a Pandora’s Box filled with a variety of sins: the sins associated with possessing and the sins associated with not possessing. The greatest sin committed by religious humans was to define God as an entity who failed to create a perfect universe inhabited by perfect mortals. (Perfectible mortals was not a good enough solution.)

With his limited intelligence, primitive man invented an anthropomorphic God modeled after a human being who possessed all the things that humans thought were desirable to possess. Therefore, in order to qualify as the perfect transcendental or metaphysical ideal, God must have characteristics, powers, and things: omniscience, omnipresence, omnipotence, and the ability to act any way He or She chooses, forever unlimited by any kind of moral, ethical, physical, or timing constraints. Any deviation from being absolutely perfect was inconceivable.

Since humans themselves couldn’t possibly measure up to the criteria established for God, they imagined that all human deviations from the high standard established for their deity must be categorized. The word chosen for these negative deviations was “sin.” By ignoring the possibility that a Creator could ever sin and by recognizing his own numerous individual human shortcomings, man proceeded to determine which sins were the more serious and which were the less serious. As I will eventually point out, thinking too much could be a sin as well as thinking too little.

As social life evolved and the human race multiplied, the more sophisticated thinkers began to see that having a simple life alone was not enough to satisfy them. To be someone of importance (poorer than God, of course, but richer than your neighbor), you had to possess things: property, chattel, or something called “wealth.” But first, you had to possess the “right” to own anything.

Consequently, the sage members of our ancient societies prudently rationalized that by being born within their territory somewhere, a native should be constitutionally entitled to certain specific inalienable rights. These rights were limited initially, but they have been expanded legally as society has become more complex.

In the birth of our nation private ownership was identified as one of the basic rights that every citizen should enjoy, especially those who made the rules and could be persuaded to do things with the simple inducement of acquiring additional wealth “easily.” Selling presidential memoirs to a book publisher for millions of dollars, for example, was never a moral or a legal issue.

Splitting hairs about sinful behavior originally was a religious pastime. Later, ambitious business oriented folks decided that sinful anti-business behavior should be regulated. Governments were established to pass laws that spelled out politically correct behavior, at least for the majority of common folks, if not for the astute lawmakers and the clever lawyers. Judges were appointed to various courts to determine who was lying about abiding by society’s rules and regulations.

Since wealth gradually became the overriding measurement of a person’s value in our democratic economy, rules governing the proper ways to accumulate wealth were necessary. Highway robbery, cattle rustling, forceful extortion, fraud, embezzlement, and other detested business practices where ownership passed from one person to another in less than honorable ways were outlawed. The only accepted way to acquire an item was by purchasing it with the currency of the realm. Trading goods was tolerated occasionally when the currency of the realm had lost its intrinsic value or when a purchaser had no money in hand but owned something of value that the other party desperately wanted.

To keep this investigation into sinful behavior simple, money and physical possessions became the symbols of wealth. And wealth meant power to do what you wanted and to have whatever you desired. (Did you notice, we have crept back to wondering whether “having” something was a sin, or not?)

Legitimate “having” or taking legal possession was key to amassing a fortune. That made a person feel good about himself when he charitably shared some of his “good” fortune with the deserving poor, the unemployed and unemployable, the physically and mentally handicapped, the drug and alcoholic derelicts, and the homeless widows and orphans.

When society’s pleas for charity to help the financially distressed went unheeded during the periodic economic recessions, the leaders of government decided to use their taxing powers to redistribute the ubiquitous and annoying evidence of wealth.

Unfortunately, despite all kinds of schemes to relieve the wealthy upper class and not-so-wealthy middle class of their savings, these leaders saw that something more was necessary. A booming economy could not be sustained by consumers who lacked money or credit. (Sad as that situation was, no sin had been committed yet, right?)

No one knows exactly who came up with the suggestion of forming the Federal Reserve Banking System to create money to finance an avaricious public, but it was the perfect idea for the time. Obviously, loaning money to buy necessities, which would be paid back from future earnings, enabled those folks considered credit worthy to indulge their materialistic appetites and take advantage of their right to own things. That these bank loans were backed by a minimal amount of capital didn’t faze anyone.

In 2003, household debt in the United States was estimated to be $8.9 trillion, which means that years of future unearned income has been committed to pay off these loans and credit advances. No economist has said that using tomorrow’s income to pay for current purchases was a sin. Governments do that all the time, don’t they? There will always be some hard-working citizen to tax that is gainfully employed.

Now the stage was practically set for the struggle to determine who is more likely to be sinful, the creditors or the debtors. With the invention of plastic during World War II and the explosive use of plastic credit cards in the last 50 years came the greatest opportunity yet to extend credit.

The growth in available credit was aided by the tax advantage of writing off consumer bad debts and the judicial interpretation that there was no such a thing as usurious interest rates, unless a state government intervened and limited what interest and fees could be charged to credit card holders by their risk-taking creditors. (To my knowledge in August 2004 when I wrote this article, no large credit card company had failed despite the favorable treatment of insolvent debtors by the bankruptcy law in effect. That law was subsequently changed to favor credit card companies.)

According to a recent article in a reliable newspaper, “Personal bankruptcies peaked in 2003 with a record 1.6 million cases… That annual total is nearly double the 812,898 filings in 1993. Credit card defaults rose more than 55% in the past four years. Home mortgage foreclosures were up 45% in the same time span.” Not a pretty picture of those who are unable to pay down their debt. Elizabeth Warren, a law professor at Harvard University who was quoted in the same article said, “…more than 90% of bankruptcies arise from job loss, onerous medical bills not covered by health insurance, and divorce.”

If we believe the comments of Ms. Warren, the sins of the debtors become more obvious, although not specific: Those who petition for bankruptcy relief just can’t find the right way to please their employers, their medical providers, or their spouses, and they seldom confess to their creditors that they were having troubles that could result in their personal insolvency.

Still, was it their responsibility to advise their creditors about the financial problems they faced before they failed to mail the payments due? Would their creditors help them if they knew, or offer a lower interest rate, or forgive the late payment fees, or arrange a less onerous refinancing plan for their unmanageable debt? Or would they merely take action to recover the collateral, if there was any?

The heartless, cruel, insensitive image of the general creditor is well known. The picture of the over-committed and struggling debtor facing debtors’ prison described in historical novels makes the compassionate weep. Whose fault was this unfortunate set of circumstances that led to prison years ago and to bankruptcy court today? The public, the government, the salesmen, the advertisers, the creditors, or the debtors? In my humble estimation all of the above who desired a booming economy, a thriving business community, and a prosperous group of worker/consumers who would promptly pay their taxes before they paid anything else!

Yes, there is no sinless person around who is qualified to cast the first stone here either. But stoning has been banned as cruel and outrageous punishment like debtors’ prison, except in the Muslim world. The professors, the philosophers, the lawmakers, and the writers with too much time on their hands speculate about what is the right way to handle an unpaid loan. Congress is studying revisions to the current bankruptcy law.

But how do you identify all the sins involved in doing business in a Caveat emptor, Caveat vendor, free enterprise economy? Each of the Seven Deadly Sins is blatantly on display in a creditor/debtor relationship at one time or another: pride, envy, gluttony, avarice, lust, sloth, and anger. If you need specific examples, read the business section of your daily newspaper.

However, the most glaring sin in our modern society is the human belief espoused by debtor and creditor alike that people can borrow from the future and never pay back what they owe during their mortal life times. Both participants of the debtor/creditor relationship seem to have the attitude that abusing the other side of the transaction if they can get away with doing so is all right.

The debtor throws up his hands when he can’t pay his debts for whatever reason, and begs for sympathy. The creditor uses whatever motivational tool is at his disposal including threats of legal action and physical intimidation to collect from the debtor. He isn’t that interested in recovering the collateral to a loan unless it has appreciated in value.

A middle aged man I know was persuaded to take out a mortgage on a dilapidated house where the monthly payment for interest only, taxes, and insurance amount to 45% of the gross family income before taxes. If he took out a regular 30-year mortgage, the payments and amortization would be more than 50% of their annual income, and he would theoretically have to pay until he was 76 years old, one year beyond his life expectancy.

In signing this agreement is either party acting responsibly? Is the debtor thinking too little about this commitment? Is the mortgage broker seriously considering the likelihood that this debtor may not be able to comply with the fine print in their mortgage agreement biased in favor of the creditor? Is there any sound thinking going on here at all? Isn’t this act by the debtor and the creditor a selfish rationalization of a “legal” purchase that for all intents and purposes is a glorified rental contract?

In the case of default, the mortgage company ends up with a house, that may result in a loss which they can write off against their other profits and reduce their taxes. The debtor ends up on the street looking for a rental property and the money to pay movers after he has been evicted.

Does anyone feel sorry for either sinful party? The statistics I have quoted show that this is happening to more and more “innocent” home buyers, who lose their jobs for whatever reason, their spouses to divorce, illness, or death, and their savings if they had any to start with. The government is pleased that there are more citizens becoming “home owners” because this is one of the prime indicators that the economy is doing “well.”

Of course, no one has any sympathy for the faceless mortgage business, especially those high-flying companies who advertise that they welcome customers with a “bad” credit history and poor credit reports. Annual interest rates haven’t been lower in over 40 years, so it is the perfect time to buy something!

When you think about it, if you ever do, every adult human has a chance to learn the “caveats.” The not-so-innocent debtors must lie down in the beds they have made for themselves and their families. Hopefully, these beds are more comfortable than the beds in the prison facilities that debtors were assigned some 300 years ago!

The sins of the almighty Federal Reserve Bank which is allowing banks to pay savers such little interest on their deposits is a topic for another musing. Good Luck, Americans!

Chic Hollis is a longtime drummer and motorcyclist, who served in the US Air Force in North Africa. Married 4 times with 5 children born in 5 different countries on four continents, Chic is a politically independent citizen of the world interested in helping Americans understand the reality that is life overseas where many intelligent, educated, and industrious people aren’t as privileged as we are in the US. He studied Latin, Greek, Russian, French, Spanish, Portuguese, and German and ran several large companies. Sadly, Chic Has left this planet and we miss him very much, but we are very pleased to display his amazing writing works.